How to create an ethical culture at your company

One of the sessions at the 2013 InsideCounsel SuperConference is titled “Corporate Culture and Setting the Right Ethical Tone From the Top”—critical concepts in business today. Since last year, when I added leadership of our human resources function to my legal and compliance department responsibilities, I have become even more familiar with the power of “ethical culture,” “tone from the top” and “employee engagement.” What do these concepts mean? How do we define them, practice them, promote them and measure them?

“Ethical culture,” according to the Ethics Resource Center, is about teaching employees “how things are done around here.” It begins with written standards of conduct that are well conceived, carefully crafted and effectively implemented. But to be meaningful, we need more than mere lip service to ethical values. Organizations with strong ethical cultures take steps to ensure that their standards are widely accessible, promoted and followed by their leaders and employees.

When leaders clearly uphold and highlight ethical values and standards, they are setting an ethical “tone from the top.” In addition to becoming strong ethical role models, today’s leaders also need to identify and remove the cultural barriers that prevent their employees from behaving ethically at all times, according to David Gebler, author of “The 3 Power Values.” To encourage employees to follow expected standards of behavior, leaders must themselves commit to the message that being ethical is more important than winning every time.

The advantages of a strong ethical culture are manifold. Studies repeatedly show that businesses with strong ethical cultures tend to have employees who are more engaged and committed. Turnover among workers tends to be lower and productivity higher. Employees feel less pressure to compromise company standards (and if they do observe misconduct, they are more likely to feel comfortable reporting it). A company is better protected from the risks of misconduct when its culture is ethically strong.

There is much that legal, compliance and human resources professionals can do to promote their company’s ethical culture, tone from the top and employee engagement, while simultaneously decreasing its legal, ethical and reputational risks. This includes:

Defining what “ethics” means in our organization, with codes of conduct, policies and processes that are clear and have strong management buy-in

Working with our internal communications teams to ensure that these written standards are well packaged, widely disseminated and messaged in a positive and appealing way

Implementing in-person leadership and ethics training for managers, as well as online ethics training that reaches our employee population, and even our key agents and vendors

Arming recruiters and hiring managers with samples of ethics-focused interview questions to help clarify where prospective employees stand on ethical challenges

Adding ethics resources, such as hotlines and helplines, that are effectively designed and made available to our employees—and, of course, monitored and acted upon by us

There are numerous examples of companies and leaders who have fallen from grace due to unethical behavior. We can best inoculate our organizations from these corporate risks and scandals by focusing our efforts on building, strengthening and removing the barriers to an ethical culture. The ethically healthiest organizations have a strong tone at the top and high employee engagement.